When an unexpected expense comes up, you may start trying to figure out how to get money as quickly as possible. One thing you may consider is a cash advance, which is a short-term loan against a credit card. When you start asking the question “Should I get a cash advance?” there are a few things to consider.
How a Cash Advance Works
Most credit cards allow you to access cash by going to a bank or credit union. If you have a PIN for your credit card, you may be able to access cash from an ATM as a cash withdrawal. When you use an ATM, there may be a limit on the amount of cash you can access each day. Contact your credit card company if you don’t have a PIN. Credit cards sometimes issue convenience checks that can be deposited into your bank account if you need cash.
The amount of available cash on your credit line is usually less than the full amount of the line. Your cash advance limit is usually stated on your monthly statement, or you can find out by calling the credit card company.
Disadvantages of a Cash Advance
Cash advances are convenient because they allow you to get cash in a hurry without an additional credit check. Before you rush to take one, keep in mind that the annual percentage rate (APR) that you’re charged for a cash advance may be higher than what you’re charged on purchases. You may also be charged fees on top of a higher interest rate, such as a cash advance fee. If you take the advance through an ATM, there may be an ATM fee.
When you make a purchase with a credit card, you usually have a grace period of around 20 days in which you can pay it back without being charged interest. Cash advances almost always start accruing interest as soon as you take them and don’t offer a grace period. If you already have a balance on your credit card, payments you make may be credited to the amount that’s accruing at a lower interest rate before it’s credited toward repaying the cash advance.
Relying on the cash advance option may cause your credit utilization to be higher than the recommended 30 percent of your available credit. A higher balance at a higher interest rate may make it harder for you to pay your bills on time.
Protecting Your Credit
Paying your bills on time is the most important thing to do to have a good credit score. Keeping your credit utilization under 30 percent is another big factor in the calculation of your credit score. Check your credit report at least annually to make sure everything that’s on it is accurate. Dispute any inaccuracies with Dovly’s help. Dovly is an automated credit repair engine that aims to help you get ahead financially. Try it risk-free with our free membership tier. Get in touch with Dovly today.